Ruby Tuesday, Inc. (RT)

RT 
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Ruby Tuesday, Inc. (RT)

March 12, 2013 8:30 am ET

Executives

James J. Buettgen - Chief Executive Officer and President

Michael O. Moore - Chief Financial Officer and Executive Vice President

Analysts

Joseph T. Buckley - BofA Merrill Lynch, Research Division

Presentation

Joseph T. Buckley - BofA Merrill Lynch, Research Division

Start in just a couple of seconds right here because of elevator issues on my part. I'm Joe Buckley, Bank of America Merill Lynch's restaurant analyst. I'm very pleased today to be hosting the restaurant portion of our consumer conference. We've got a terrific line of companies both today and tomorrow and welcome your attendance live and over the Internet. We're going to start off our restaurant presentations with Ruby Tuesday, and there's a bit of old and a bit of new with this presentation. Ruby Tuesday is the restaurant company that I've followed the longest, the most continuous coverage in my universe, dating back to a date I probably won't mention, but it's been a long, long time, a lot of ups and downs, a lot of interesting times. The new is that for the first time, we've got a new reader at Ruby Tuesday, new CEO J.J. Buettgen, who just joined the company December 1. So we're very pleased that he's willing to come out and talk with us roughly 90 days into his tenure. With that, I'm going to turn it over to J.J. Buettgen.

James J. Buettgen

Thank you, Joe, and good morning, everyone. Thank you very much for taking the time to come out and talk to us today. With me today, I have Greg Ashley who's Vice President of Finance; as well as Michael Moore, who's our Executive Vice President and CFO. Michael is going to be handling the financial section of today's presentation.

So since most of you probably don't know much about me, before I get started, I just wanted to take a few minutes to give you a sense of my background, so you have a sense of what you're dealing with here. I've been in the consumer and marketing space for about 24 years now. About 14 of which has been in the restaurant sector, started my career with General Mills, worked up in packaged goods in Minneapolis for a while, and my first entry into the restaurant space was back in the mid-'90s when the Olive Garden Red Lobster brands were still part of what was then the General Mills restaurant division, originally as the Director of advertising for the Olive Garden, ultimately as the Head of Marketing in Culinary for the Olive Garden. So those 2 companies combined about a 10-year stretch. I then spent 4 years in the entertainment business working for Hollywood Entertainment, as well as The Walt Disney Company and then came back into restaurants in 2002 when I was the Head of Marketing for Brinker International and then ran a concept for Brinker for a while. I came back to Garden about 8.5 years or so ago as part of the transition plan when Joe Lee retired as Chairman and Clarence Otis was made the CEO, originally came in to be a Concept President running Smokey Bones for Darden and then went into new business development for Darden, and in that role had a chance to do a number of things. One of which was retool the insights organization at Darden, did a lot of work on -- from the consumer analysis for acquisition candidates, took some of their brands international for the first time, doing some deals in the Middle East, as well as Mexico and Brazil and led the team to developed what Darden now talks about as the "synergy restaurant" concept, which is a small market expansion vehicle for their large concepts and then for about the last 1.5 years up until this December, served as the Chief Marketing Officer for Darden before coming to join Ruby Tuesday. So a couple of takeaways in terms of background, one of which is a lot of experience in marketing and strategy and in a number of different consumer categories and also had the chance to see what great looks like, whether that's in terms of great brands, great strategy, great processes and tools to development brands and great people. And that's the background that I bring into this role at Ruby Tuesday.

So before we get started into the presentation, I do want to remind you of our forward-looking statements that you can read in our most recently filed 10-Q. So now that, that's out of the way, I'd like to start by giving you an overview of Ruby Tuesday, Inc. The company has consolidated revenues of $1.3 billion and a market cap of approximately of $440 million. As of our most-recent quarter end in early December, we had 786 Ruby Tuesday restaurants, with 7 of those being company owned and 77 franchised. Ruby's has average restaurant volumes of approximately $1.75 million, and the Ruby Tuesday concept represents about 98% of our total revenue as a company, and it's obviously the primary focus with us as the management team. Our Lime Fresh Mexican casual -- fast casual concept, which we acquired in April 2012, had 15 company-owned restaurants and 5 franchised locations as of the quarter end December.

As we look at the company today, our #1 priority is to stabilize and grow same restaurant sales and guest counts at the Ruby Tuesday brand. We have tremendous upside and leverage since given that we've got over 700 locations. We also currently have approximately 40% to 45% EBITDA flow-through on our incremental sales given that we've got a really tight cost structure. So any upside on the Ruby Tuesday's brand has significant impact to our financials.

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